Cheat Sheet - Q&A:
Today’s Topic: Setting budget priorities
Brian, my wife and I don't always agree on what our financial priorities should be. I'm worried that outside putting some money away in retirement we aren't really making enough progress towards our longer term goals. I remember you talking about allocating extra money. We have a mortgage, retirement accounts & a little credit card debt.
Bottom Line: Recently I discussed my a third, a third, a third plan. I believe that was the impetus behind your question. So what’s this third thing? It’s about taking the total amount of free cash flow each month and dividing it in thirds to make progress against all of your major goals simultaneously.
Here’s the breakdown:
- A third towards debt reduction
- A third towards vacations, home improvement, wants generally
- A third towards investment in taxable accounts
So the debt reduction would start with the credit card debt in your case and move over to your mortgage principal once you’ve paid off your credit cards. Once you pay off your mortgage you can reallocate that third however you’d like each month. I believe that the third towards wants is self explanatory so I’ll move to the third in taxable accounts.
Retirement accounts are great resources and the third used for investment in taxable accounts is designed to be in addition to your contribution to retirement accounts. Why would you not just put the money into retirement accounts?
Putting a third of your money in a taxable account will allow you to invest and grow your money (albeit with tax consequences if you achieve gains, dividends or interest in a given year) while granting access to this money should you experience a rough patch during your life. Unfortunately most people who lose a job and/or experience hardships tap their retirement accounts. Not only does this harm a tax advantaged investment but it often will come with significant penalties as well. Hopefully you won’t need to tap your taxable investments but it’s good to have resources available to you without penalty if you do.
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JD Power’s top ranked financial advisory firms 2014:
Bottom Line: JD Power has two different sets of ratings. Their ratings based on their perception of the services and products available and their customer satisfaction rankings. This story is about the customers.
Are you happy with your financial advisor? Generally the answer will be yes but there is a tremendous difference between the best and worst ranked firms this year. To begin with the JP Power scale is out of 1000 points possible. Here are some key breakouts:
- The average customer satisfaction across all financial advisors is 721 (good for three stars)
- There was only one 5 star ranked firm this year – Edward Jones with a 904 (or to put it another way… just over 90% satisfaction rating)
- Raymond James & RBC were both four star rated
- Morgan Stanley Wealth Management was the worst major firm at just 596 points (good for only two stars)
So clearly there was a huge difference between the best and worst firms according to the average customer. For the complete report click here: http://www.jdpower.com/press-releases/2014-us-financial-advisor-satisfaction-study
Summer job scam hitting popular job search sites right now:
Bottom Line: If you, or your kids, are looking for a job be careful when responding to online listings… Even if they contact you…
Scammers are taking to jobs listing sites like Craigslist and free listings on sites like Monster.com & CareerBuilder to lure in eager job seekers. If you come across one of the scam listings they’ll ask you for personal information, up to and including your Social Security number to expedite the hiring process. Some who are inexperienced job seekers or those who are extremely hopeful might be willing to hand over the information without a formal interview process. Instead of a job waiting for you, only ID theft is in these cases. Notify your kids to be cautious. The Better Business Bureau is keeping up with these cases. Report any issues to them and if you’re concerned that a job listening your considering may be fraudulent, you might check with them in advance.
Good news... More Jobs - but half don't require degrees - the overqualified state of employment:
Bottom Line: By now you know that the June job gains were the best of 2014 and one of the better months since the end of the Great Recession. That’s the good news. Digging a little deeper we do still see that most of the jobs aren’t of the more advanced variety.
- About 65% of all jobs & 50% of full-time jobs added in June didn’t require a degree
This means that many recent college grads may have better job prospects as anticipated, but their degree may not be utilized by this first opportunity. In other words college grads are generally going to find themselves “over qualified” for the jobs that are available to them. The more I looked into this, the more sense the near record low labor participation rate made to me. I think it’s possible that many people who have be laid off may be burning through savings waiting for a better job opportunity that may or may not come. I also think that many recent college grads may be moving back home for just the same reason.
The more diligent approach would likely be to work in the best opportunity possible in an effort to make yourself valuable to be able to be promoted into an opportunity that will enable you to make use of your degree:
Apple's Next Gen security features:
Bottom Line: One of the annoyances of the modern on demand mobile era is the need to constantly be inputting security codes or finger prints to get to our mobile devices. The result is often that people will forego the security settings altogether. A really bad idea if you leave a mobile device laying around somewhere. So Apple is working on new security tech that should be ready for their next generation devices later this year. It isn’t game changing but it should provide more convenience in a world that demands more security to protect us.
Once online this new tech would allow you to create “safe zones” like your home or office for example. When you’re in a safe zone your devices wouldn’t require security features being entered to use. When outside a safe zone they’d be required. Pretty simple and it makes much more sense than disabling security for the ease of use all of the time.
TSA security on devices back into the US - what to know before you travel internationally:
Bottom Line: Before leaving the country, make sure you have the power cords for all of your electronics. Not just because it’s a good idea if you want to use them, but because they may not come home with you if you don’t. TSA is now searching electronic devices prior to granting security clearance back into the US in select situations. What this means is that if asked by the
TSA you need to be able to boot up your electronic device for TSA to approve passage of the device. This is true of computers, tablets and smart phones. Also you’ll want to double check your electronics to ensure they have a charge prior to going to the airport so you won’t have to leave the security line to find a place to charge your devices.
Some countries have already been doing this so it’s not a new concept but it is a new policy of the United States. It’s not yet known how wide spread this will be but it’s know that Heathrow in London is already performing these checks for re-entry into the US.